Friday’s huge short squeeze rally seems the market seems to be struggling this morning with the very vague so-called Phase 1 deal as China now says they need more discussion before signing anything.  Over the weekend, we’ve also learned that the Brexit deal is once again proving elusive with the Sterling reversing Friday’s hopeful gains.  We also know the conflict between Turkey and Syria has escalated and that Hong Kong protesters are talking about scaling back on their activities.  What a difference a weekend can make!

Asian markets closed green across the board overnight, but that sentiment has not translated into bullish notions in Europe, which are currently seeing red across the board this morning.  US Futures have recovered from overnight lows as the vague Phase 1 deal may be harder to close than the hopeful market initially thought.  With today being a banking holiday and 4^th quarter earnings beginning Tuesday a light and choppy day would not be out of the question after a what could be a volatile open.

On the Calendar

Because it’s the national holiday Columbus Day banks and bond markets will be closed today.  As a result, we have no Economic Calendar reports today.

We have just nine companies reporting earnings today, but none are particularly notable and unlikely to be market-moving.  However, keep in mind, the official beginning of the 4^th quarter earnings begins Tuesday morning with several big banks reporting.

Action Plan

What a difference a weekend can make.  After a huge short squeeze rally that closed the Dow over 300 points higher on news of a partial trade deal.  This morning the news seems to have reversed, suggesting that China needs more discussion before a possible deal can be signed.  Details of the so-called Phase 1 deal have been few and far between; in fact one could argue extremely vague.  By the way, how many Phases are there?  In other news, the conflict between Turkey and Syria has escalated over the weekend with Turkey preparing to invade a northern Syrian city. 

The positive news of Brexit progress seems to have also shifted as many not suggest Britain will need to ask for another extension which the Prime Minister is not in favor of doing.  On a technical basis the DIA, SPY, and QQQ are now well above their respective 50-day averages but have left significant gaps behind as well as not so confident shooting start candle patterns behind.  As I write this report, futures are pointing to lower open but rallied to cut the overnight lows almost in half.  I would not be at all surprised to see the overnight lows tested after the open.  With today being a banking holiday with the bond markets closed, I’m expecting a light and choppy price action after the morning rush as we wait for the official kick-off the 4^th quarter earnings on Tuesday.

Trade Wisely,

Doug

Abounding optimism of a trade deal has the market surging higher this morning even though we have not seen any details as to what negotiations have produced.  Will there be a deal, a partial deal or could this morning gap be irrational exuberance?  Could this trigger a huge short squeeze that drives short traders of the market, or might this create a big pop and drop pattern if we learn there is no deal and tariffs increase next week?  The bigger question is, how will you manage your risk as we head into the weekend if we have no answers to these questions by the close of today?

Overnight Asian markets closed the week green across the board on trade optimism.  European markets are also decidedly bullish this morning amid rising hopes of a Brexit deal coming together.  US Futures point to a wildly bullish gap up open of more than 250 Dow points as the President, and the Vice-Premier conclude the 2-day meeting today.  With such an emotionally charged market, remain flexible and prepare for volatile price action in reaction to trade developments.

On the Calendar

We have 14 companies expected to report on the Friday Economic Calendar.  Notable reports include FAST and INFY before the open today.

Action Plan

Looking at the US Futures this morning, I’m honestly speechless at the huge bullishness this morning after positive comments on negotiations with early today.  It seems we’ve been down this road before that ended with no deal, but the market is wildly this morning even though there have been no details released.  Perhaps we’ll know more later today but be prepared for potential violent volatility as the news rolls out.  There is also hopeful news from across the pond that the British Prime Minister and the EU have found some common ground after reporting a path to a Brexit deal is improving.

Today’s huge gap up could trigger a big short squeeze forcing the market even higher.  T2122 could easily swing from short-term oversold to short-term overbought all at once, making a mess of the chart technical.  We should also not rule out the possibility of a pop and drop pattern that could quickly develop if the trade news happens to spin the opposite direction.  The big question for me is, what happens if we hear no details on trade negotiations until after the market closes?  How much risk are you willing to hold into the weekend?  Plan carefully and remain focused on price as the emotionally charged market could provide a very wild ride today.

Trade Wisely,

Doug

During the evening and night, we saw just how sensitive to news reports and how emotionally charged the market has become over China’s trade developments.  While the markets seem to hold on the notion of a partial deal coming together in the high-level talks, reports suggest the 2-day meeting may have shortened to just today.  Stay tuned, stay focused, and stay very directionally flexible as each new report could substantially move the market violently.  Plan your risk carefully.

Asian markets recovered early losses by the close of the day on conflicting reports regarding trade.  European markets are trade cautiously mixed as negotiations resume in Washington DC.  US Futures recovered from steep losses during the evening and indicated just how quickly market sentiment could shift as news on progress or non-progress of the negotiations rolls out.  Remember, an October tariff increase to 30% will happen unless something changes with the US/China relationship.

On the Calendar

On the Thursday Earnings Calendar, we have our biggest day of reports this week, with 25 companies fessing up to results.  However, there is only one DAL, which is reporting before the opening bell that’s notable.

Action Plan

Conflicting news reports created a wild night of price action that saw futures collapse more than 200 points but recovered to near falt this morning.  That’s a clue to just how emotionally charged and sensitive the market has become over any news on the high-level talks today.  It sounds as if the China negotiations may start and end today rather than the planned 2-day schedule.  What we know as of now is that tariffs on 250 billion dollars of Chinese products will increase from 25% to 30% on October 15^th.

Traders should prepare for the possibility of very violent price moves as news comes out concerning the progress of the talks.  Technically, speaking the indexes are at a critical crossroads, with prices hanging just below declining 50-day moving averages and substantial price resistance just above.  With such unstable price moves, this can become a day-traders market due to will price action fluctuation and the overnight reversal risks.  Carefully plan your risk and remain very directionally flexible as we wait for news on trade negotiation developments throughout the day.

Trade Wisely,

Doug